Primerica Exam study
An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? a) Common Disaster b) Accidental Death c) Survivor Life d) Second-to-Die
Common Disaster
An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it? a) Flexible premium b) Immediate c) Deferred d) Fixed
Deferred
All of the following statements concerning dividends are true EXCEPT a) Dividend amounts are guaranteed in the policy. b) Lower insurance company costs generate higher dividends. c) They stem from favorable underwriting experience. d) Favorable investment results generate higher dividends.
Dividend amounts are guaranteed in the policy dividends cannot be guaranteed
The automatic premium loan provision is activated at the end of the a) Elimination period. b) Policy period. c) Grace period. d) Free-look period
Grace period.
What do individuals use to transfer their risk of loss to a larger group? a) Insurable interest b) Exposure c) Indemnity d) Insurance
Insurance Insurance is the mechanism whereby an insured is protected against loss by a specified future contingency or peril in return for the present payment of premium. Because many other individuals with the same or similar risk of loss are paying premiums, funds are available to indemnify those who actually suffer that loss.
Which of the following settlement options in life insurance is known as straight life? a) Life with period certain b) Fixed amount c) Life income d) Single life
Life income The life-income option, also known as straight life, provides the recipient with an income that he or she cannot outlive. It pays the benefit while the beneficiary is alive; however, the payments stop at the beneficiary's death.
In which of the following instances would the premium be tax deductible? a) Premiums paid by an employer on the life of a key person b) Premiums paid by an employer on a $30,000 group term life insurance plan for employees c) Premiums paid by an individual on his/her own life insurance d) Premiums paid by a mother on her son's policy
Premiums paid by an employer on a $30,000 group term life insurance plan for employees As a general rule, premiums paid for life insurance are not tax deductible. The exception to this rule is when an employer buys group term life insurance for his employees since it is considered a business expense.
A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? a) Cost of Living Rider b) Value Adjustment Rider c) Return of Premium Rider d) Inflation Rider
Cost of Living Rider
What is the purpose of settlement options? a) They provide the beneficiary with the income he/she cannot outlive. b) They determine how death proceeds will be paid. c) They are guarantees built into the policy. d) They guarantee a return of excess premiums.
They determine how death proceeds will be paid.
All of the following are requirements for life insurance illustrations EXCEPT a) They must identify nonguaranteed values. b) They must differentiate between guaranteed and projected amounts. c) They must be part of the contract. d) They may only be used as approved.
They must be part of the contract.
The LEAST expensive first-year premium is found in which of the following policies? a) Increasing Term b) Decreasing Term c) Level Term d) Annually Renewable Term
Annually Renewable Term Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
Which of the following is a feature of a variable annuity? a) Interest rate is guaranteed. b) Securities license is not required. c) Benefit payment amounts are not guaranteed. d) Payments into the annuity are kept in the company's general account.
Benefit payment amounts are not guaranteed. Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license.
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? a) Variable period b) Variable amount c) Fixed period d) Fixed amount
Fixed amount Under the installments for a fixed amount option, the annuitant selects the amount of each payment, and the insurer determines how long they will pay benefits. This option pays a specific amount until the funds are exhausted. There are no life contingencies.
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT a) The payments are not guaranteed for life. b) The insurer determines the amount for each payment. c) It is a life contingency option. d) It will pay the benefit only for a designated period of time.
It is a life contingency option. Under the installments for a fixed period annuity settlement option, the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. This option pays for a specific amount of time only, and there are no life contingencies.
Under a pure life annuity, an income is payable by the company a) For as long as either the annuitant or a named beneficiary is alive. b) Only for the life of the annuitant. c) Until the principal and interest are exhausted. d) For a guaranteed period of time, whether or not the annuitant survives to the end of that period.
Only for the life of the annuitant. With pure life annuity, income payments cease at the annuitant's death and there is no refund or payments to survivors. This type of annuity is also referred to as Life Only or Straight Life.
Which of the following is another term for the accumulation period of an annuity? a) Premium period b) Liquidation period c) Annuity period d) Pay-in period
Pay-in period The accumulation period is also known as the pay-in period. It is the period of time over which the annuitant makes payments (premiums) into an annuity.
Which of the following would provide an underwriter with information concerning an applicant's health history? a) A medical examination b) The agent's report c) The inspection report d) The Medical Information Bureau
The Medical Information Bureau An agent's report and inspection report provide personal information. Medical exams provide information on current health. Only the MIB will provide information about an applicant's medical history.
Which of the following applicants would NOT qualify for a Keogh Plan? a) Someone who works 400 hours per year b) Someone who has been employed for more than 12 months c) Someone who is over 25 years of age d) Someone who works for a self-employed individual
Someone who works 400 hours per year A person must have worked at least 1,000 hours per year to be eligible for a Keogh Plan.
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? a) Guaranteed insurability option b) Dividend options c) Guaranteed renewable option d) Nonforfeiture options
Guaranteed insurability option The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.
Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose a) Section 457 Deferred Compensation Plan. b) 403(b) plan. c) 401(k) plan. d) HR-10 (Keogh Plan).
HR-10 (Keogh Plan). HR-10 (Keogh Plans) are plans specifically for self-employed and their employees.
Stranger-originated life insurance policies are in direct opposition to the principle of a) Law of large numbers. b) Good faith. c) Indemnity. d) Insurable interest.
Insurable interest.
Who makes up the Medical Information Bureau? a) Hospitals b) Former insured c) Physicians and paramedics d) Insurers
Insurers The Medical Information Bureau is made up of insurers so the companies can compare the information they have collected on a potential insured with information other insurers may have discovered.
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy a) Required a premium increase each renewal. b) Built cash values. c) Required proof of insurability every year. d) Decreased death benefit at each renewal.
Required a premium increase each renewal. Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.
Which two terms are associated directly with the way an annuity is funded? a) Renewable or convertible b) Single payment or periodic payments c) Increasing or decreasing d) Immediate or deferred
Single payment or periodic payments Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.
Under an extended term nonforfeiture option, the policy cash value is converted to a) A higher face amount than the whole life policy. b) The same face amount as in the whole life policy. c) The face amount equal to the cash value. d) A lower face amount than the whole life policy.
The same face amount as in the whole life policy. Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy.
Which of the following is NOT true of life settlements? a) They could be sold for an amount greater than the current cash value. b) They involve insurance policies with large face amounts. c) The seller must be terminally ill. d) They could be used for a key person coverage
The seller must be terminally ill With Life Settlements, unlike with viatical settlements, the seller does not need to be terminally ill. They usually involve life insurance policies with a face amount of $250,000 or more, "key-person" coverage, corporate owned policies, or policies representing excess coverage that is no longer needed, and could be sold for an amount greater than the current cash value.
Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings? a) Employer's matching contribution can be 50% of employee's salary. b) 75% of employee's contributions are taxed. c) They are tax deferred until withdrawn. d) Taxes must be paid in full.
They are tax deferred until withdrawn. Taxation is deferred on both contributions and earnings until funds are withdrawn.
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a) Universal Life - Option A b) Universal Life - Option B c) Equity Indexed Universal Life d) Variable Universal Life
Universal Life - Option A
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value? a) Decreasing term life b) Variable universal life c) Increasing term life d) Credit term life
Variable universal life Variable universal life policies have cash value, so they allow policy loans. Term insurance policies do not have cash value.
Which of the following is a key distinction between variable whole life and variable universal life products? a) Variable universal life is regulated solely through FINRA. b) Variable whole life allows policy loans from the cash value. c) Variable universal life has a fixed premium. d) Variable whole life has a guaranteed death benefit.
Variable whole life has a guaranteed death benefit. Variable universal life insurance may or may not have a minimum death benefit, unlike variable whole life insurance which guarantees a minimum death benefit.
The main difference between immediate and deferred annuities is a) The number of insureds. b) The amount of each payment. c) When the income payments begin. d) How the annuity is purchased.
When the income payments begin. The main difference between immediate and deferred annuities is when the income payments begin. Immediate annuities will begin payments within the first year, while deferred annuities will not begin payments until sometime after the first year.
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than a) With the policy. b) Upon issuance of the policy. c) Within 30 days after the first premium payment was collected. d) Prior to filling out an application for insurance.
With the policy. If a life insurance policy contains a free-look period of at least 10 days, the buyer's guide can be delivered with the policy. If it doesn't, the buyer's guide must be delivered prior to accepting the initial premium.
